Digit Review 2019: When It’s Worth It & When It’s Not

Behavior science tells us that we’re wired to take the path of least resistance. As Dr. Nobuhiro Hagura of University College London says, “Our brain tricks us into believing the low-hanging fruit really is the ripest.”

As such, when one option is harder (like saving money vs. spending money) we’re more likely to think it’s the wrong choice — even when it clearly has the best long-term benefits.

We can’t deny that it’s becoming easier to spend money. This trend started with the advent of credit cards a few decades ago. But today, there are many new frictionless payment options. Apple Pay lets you shop with a tap of your phone (or even your watch). Disney has MagicBands, where theme park guests can make purchases with a wave of their wrist. Amazon is even working on a technology called “Just Walk Out,” which will allow you to walk into Whole Foods, place items in your cart, and walk out without waiting in line or seeing a cashier. In other words, companies are investing billions of dollars into finding ways to make spending easier than it’s ever been.

Many people believe that frictionless spending is one of the root causes of some of today’s most common financial problems.

But this raises a profound and potentially powerful question: What if we leverage the concept of the path of least resistance to our advantage? Specifically, what if we make saving money easier and spending money harder?

That’s exactly what Digit — an automatic savings service that uses artificial intelligence to help people achieve their personal finance goals — aims to do.

In this Digit review, you’ll learn all about the service and its app (available for both iOS and Android), including how it works, the pros and cons, who will benefit the most from the service (and who it might not be a good fit for), and much more.

Digit Review

Digit helps you reach your financial goals through the use of a proprietary algorithm that analyzes your income, expenses and spending habits, and then automatically determines how much money can be moved from your checking account into savings.

The service then automatically transfers those funds into your Digit account, which functions as a non-interest-bearing savings account. Its goal is to help you save small amounts of money on a consistent basis, which can help people who are struggling to build a solid financial foundation.

These amounts will generally be small — the average transfer is about $18 two or three times per week, according to Digit — and will be directed to your “rainy day fund,” which is the name of every Digit user’s default savings pool. Users also have the option to set goals, whether that’s a vacation, buying a house or paying off student loans. Savings can then be directed towards each of those goals, and are divided into pools accordingly to help you keep track of your progress.

Is Digit right for you? This review will help guide you through your decision-making process.

How Digit Works

After signing up for the service, you’ll link it to your bank account. Digit is compatible with more than 7,000 U.S. banks, but it can only connect to one checking account per user. In a victory for convenience, you only need to provide your online credentials to connect the service to your bank — you won’t have to manually enter your routing and account number.

The first thing you’ll notice is the “rainy day fund,” which is the name of your default savings pool. Digit’s key feature is its automatic transfer functionality, which pulls money from your checking account and deposits it into this rainy day fund. You can pause these transfers or withdraw funds at any time.

The service is designed to help you save based on your financial status, rather than an arbitrary number that may work fine in some months but not in others. As such, the Digit savings algorithm takes into account factors like your checking account balance, pending income (paychecks or predicted irregular income), known expenses (like utility bills), and recent spending patterns.

While you should still have a household budget, Digit does a lot of the work for you. Each weekday, the algorithm calculates a small amount of money that it knows you can afford to set aside and moves it over to your rainy day fund.

Digit tries to make these transfers as innocuous as possible; the idea is that you’ll hardly notice the funds that have been set aside, but will, over time, become accustomed to the practice of saving.

Think about it like this: Many people struggle to save because it’s not a priority. If they have money left over in their checking account at the end of the month, they might see that as “extra” money and use it for other purposes. Psychologically, it’s much more difficult to pull $300 from your account in one lump sum — and in doing so, defer whatever you might want to spend that money on — than to set aside a few dollars per day. Digit breaks down the psychological barrier to saving by making it automatic, mechanical, and relatively painless.

Beyond the basic functionality of the service, the real power of digit comes from its ability to help you set and achieve personal finance goals. The app lets you choose from a list of common goals (such as emergency fund, paying off student loans, traveling, retirement, etc.) or define your own, and then set the timeframe in which you’d like to save the necessary amount of money. Digit’s algorithm adjusts to try to match your savings habit with the goals and timelines you’ve defined.

Unfortunately, the funds you keep in your Digit account don’t accrue interest, although they are held in an FDIC-insured bank.

The fact that Digit doesn’t pay interest isn’t ideal, but it shouldn’t stop you from using the service if it will help you build your savings. There are no minimum balances and no fees for withdrawals, so there’s no need to keep your money in your Digit savings account for the long term — you can periodically transfer it to a traditional savings or investment account that provides a better return.

Digit Fees

Digit users start with a 30-day free trial. After that, a subscription is $2.99 per month, billed directly from your checking account until you cancel.

You can always withdraw funds at any time, free of charge. And there is no minimum account balance.

Also, keep in mind that Digit offers a savings bonus that is unlocked by using the service for three consecutive months. With this bonus, you’ll earn 1% annually, paid quarterly, based on your average daily account balance.

That means if your average daily balance over the previous three months was $4,000, you would receive a quarterly bonus of $10, totaling $40 over the year. That would cover the service fee for the Digit app, although it’s worth noting that this essentially represents a 0% return on your savings. There are better-paying savings accounts out there, so you should view Digit as a personal finance tool that can help you improve your financial behavior, rather than as a means of investment.

Pros and Cons of Using Digit

What do I like best about Digit? And what’s missing? Here are some of the pros and cons of the service.

Pros:

Automation. Digit makes it easy to save money by automatically transferring “extra money” it finds in your bank account into savings. With Digit, you can essentially “set it and forget it,” which is almost certain to help you save more money consistently.

Easy to get started. It only takes a few minutes to open a Digit account, and the app is very simple to use. It has a straightforward interface that provides the information you need in a clear, uncluttered format.

No-overdraft guarantee. Allowing an algorithm to automatically transfer money out of your checking account might seem problematic on the surface, but Digit is designed to never pull money that would cause your account to go negative. When your checking account is relatively low, the algorithm becomes very conservative in order to avoid any undesirable consequences.

If you do overdraft because of Digit’s auto-saving transactions, the company will reimburse your account. If they can locate the overdraft fee, they will do it automatically; if they can’t, you will just need to provide information on the overdraft fee to Digit.

Low balance feature. Another way Digit helps avoid overdrafts is via its optional “Low Balance Protection Feature,” which you can turn on and configure from within the app. This feature allows you to set a minimum desired balance for your checking account. If your balance falls below that figure, Digit will transfer money from your savings account back into your checking account. For example, if your minimum balance is set to $500 and your balance falls to $480, Digit will send $20 back to your checking account.

Savings bonus. The 1% annual savings bonus, paid quarterly based on your average account balance over a three-month period, is a nice perk for using the app. Digit also gives you the ability to earn $5 when you refer a friend, and sometimes offers bonuses for referring a certain number of new users within a given time period. (For example, my app currently shows a $100 bonus if I refer five people.)

Manage your account via texting. You can use your cell phone to perform a number of the key functions offered by Digit. Each day, Digit will send you updates on your checking account balance. You can then respond with commands such as “recent” to see your latest transactions or “savings” to view your savings balance. You can adjust these settings if you don’t want to receive daily text notifications.

Short-term goals. Digit isn’t a great tool for long-term or high dollar savings goals, simply because the amounts of money that are transferred are typically very low. It is good, however, for short-term savings goals, such as paying off the last few hundred dollars on a credit card or saving for a family vacation

Monthly fee. Digit charges a monthly fee of $2.99. This is less than a cup of coffee for most people, so it’s not exorbitant. But there are other options that may be cheaper for you.

Unclear savings amounts. Digit uses an algorithm to determine how much money you can save each day based on your checking account balance and other factors. But if you’re nervous about having an amount pulled from your account without knowing exactly what it will be, this is probably not the best option for you.

U.S. only. Digit is only available to customers in the United States.

Alternatives to Digit

The core benefit of Digit is automating your savings by paying yourself first. And while apps can certainly help, they are not the only way to apply this concept to your finances.

Automated 401(k) withdrawals and setting up automatic transfers from your checking to savings account, which could be an emergency fund or an investment account such as an IRA, are viable alternatives to Digit.

And in some cases, they’ll make a lot more sense. One example is if you’re someone with a 401(k) match and no high-interest credit card debt.

Conversely, there are other apps on the market that provide similar features and benefits to Digit, which include:

Digit vs. Acorns

Digit and Acorns are similar in that they are both designed to help you save small amounts of money that you otherwise wouldn’t save.

With Acorns, purchases you make with your linked debit or credit cards are “rounded up,” and those funds are automatically transferred to your account. For example, if you buy a bagel for $1.50, Acorns will “round up” the purchase to $2 and send 50 cents to your account.

This can be an effective way to save, but it’s important to keep in mind that it doesn’t take your overall financial situation into account.

Digit is designed to pull funds in a way that you hardly notice. So, if you use your debit card frequently, you may find that you end up saving a significantly larger amount of money with Acorns — which may be a good thing or a bad thing, depending on your particular circumstances.

Another big difference is that Acorns is an investment account, rather than a non-interest-bearing savings account like Digit. As such, it won’t directly help you with goals, like paying off credit card debt or student loans, as Digit can.

Acorn’s fees are $1 per month for accounts with a balance under $5,000, and .25% of the balance per year on accounts over $5,000. They also offer four years of free service for students with a valid .edu email address.

Digit vs. Qapital

Qapital is a similar microsavings app that allows you to set rules and transfer small amounts of money from your checking account into a savings account. These rules function similarly to the goals you can define within Digit. For example, Qapital has a popular “52 week rule,” in which you save $1 the first week, $2 in the second week, and so on. There’s also a “guilty pleasure rule” and a “round-up rule,” among others. Qapital pays a 0.10% interest rate (compounded monthly) on your savings.

Qapital has a tiered membership structure that ranges in cost from $3 to $12 per month.

Digit vs. Trim

The idea of Trim is to make it easier to spend less money. It does this in many different ways. For example, Trim will scan your checking and credit card accounts for recurring charges to see if there’s anything you want to cancel.

If you do, you can just tell Trim and it will take care of the rest. Trim can also negotiate your cable and internet bills.

Common Questions About Digit

Is Digit FDIC Insured?

Your Digit account is held at an FDIC insured bank. While Digit isn’t a bank itself, the funds are insured on a “pass through” basis, meaning your account is protected by FDIC insurance.

Is Digit Safe?

Digit is as safe to use as any bank account. Not only are your funds protected by the FDIC, Digit uses a 256-bit encryption protocol to protect the transmission of your data. Any sensitive information uses an asymmetric cryptography architecture with state-of-the-art protection, along with additional firewalls and security precautions to protect your identity and data.

Are There Free Alternatives to Digit?

While most microsavings apps have a small fee, there are some good alternatives for those who are looking to avoid any fees yet receive similar services.

Tip Yourself: This app essentially acts as a virtual “tip jar.” You can “tip” yourself a certain dollar amount, which is then transferred from your checking account into a secure “tip jar.” Tip Yourself lacks the automation of Digit, so you’re responsible for manually moving money. One fun feature of this app is a social media-like connection with other users, who can share savings activities, personal wins, and words of encouragement.

Simple: Similar to Digit, Simple has an automated savings feature that helps you save money toward a goal. It also has a handy “Safe-to-Spend” feature, which takes some of the guesswork out of a potential purchase by considering upcoming bills and pending transactions. It also has a strong expense tracking and budgeting section, and you can pay bills online via your Simple account.

How Does Cancellation Work?

You can easily cancel your Digit account online at any time. Any remaining funds in your Digit account will be transferred back to your checking balance the next business day.

Digit Review: Final Summary

Digit is a great option for certain people in certain circumstances. One of the big issues many of us face today is that spending is frictionless; we have many of our bills set up for automatic payment, so we don’t even realize what’s coming out of our account. Well, Digit makes savings frictionless as well.

On the other hand, Digit isn’t ideal for those who have little trouble following a household budget or saving money on their own. If that’s the case, you should opt for a savings or investment account that offers a better return.

It’s also important to remember that saving money for no reason in particular is rarely a strong enough motivation to change your financial behavior. As you begin, think about what you’re using Digit for, define your “why,” and set specific goals you’re trying to reach. Rainy day funds are important, but they’re abstract. We know the day will come when we’ll need to fix our car, pay a medical bill, or cover some other unexpected expense. But we don’t know what, or when, or how much it will be.

Conversely, that trip you’ve been wanting to take to Siesta Key next spring is concrete. I bet you can feel the sand between your toes and taste the strawberry daiquiris as you read this. When you set a specific goal (e.g., “Florida Beach Vacation”), you’ll feel a sense of achievement as you watch the funds add up. You’ll see a direct link between your actions and your desires. And that makes the process much easier to stick with.

As one of the best savings app options available, Digit serves a particular purpose. And like most financial tools on the market today, it makes sense for some, but not for others.

About The Author

R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

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